Impact

Business Review for
180
170
FORT WAYNE SMSA
TOTAL WAGE AND SALARIED EMPLOYMENT
COMPOSm INDEX OF AREA LEADING INDICATORS
160 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
150
140
130
120
110
70
60 +---~--~--~--~--~~
78 79 80 81 82 83 84
Vol. 2 No.1 Community Rese .. rch Institute, Bure .. u of Business & Economic Rese .. rch
lndgn .. University - Purdue University .. t Fort w .. yne
FEBRUARY-MARCH 1983
Index Continues Up; Employment Still Continues Down
The Leading Economic Indicators Index for the Fort Wayne Area had its largest monthly rise in january since
bottoming last March. The breadth of the Index was also impressive in that all four components moved favorably in
january; however~ area employment resumed its drift downward in the last quarter of 1982.
The Composite Index of Leading Indicators for the
Fort Wayne area rose over one and one-half points in
January, the biggest jump since it began last April what
has proved to be a laborious turnaround effort.
AREA EMPLOYMENT TREND STILL DOWN. Area em­ployment
has eroded an additional2,000 since October,
after holding steady through the summer. Hidden
within the aggregates was the encouraging fact that the
loss in employment occurred exclusively in the non­manufacturing
sector of the economy. Manufacturing
employment actually increased by 100. Area wage and
salaried employment in January was a seasonally adjusted
156,300. That the employment trend continues to resist
its forecasted turnaround has two primary reasons. (1) It
is to be expected that the downward momentum built
up over what by March will be four years will take a
relatively long time to reverse; (2) area economic activity
- as measured by employment - continues to suffer
from the phased pullout of International Harvester
truck-manufacturing operations. The area is programmed
for a direct loss of 2100 jobs over the remainder of the
year. Whether this programmed loss plus any ripple
losses will be more than offset by increases in the
remainder of the economy d-epends primarily upon the
strength of the recovery. Given the character of the
recovery to date, it is difficult to envision area employ­ment
turning up prior to next fall. For a turnaround to
materialize then will require a string of increases in
the Index similar to the January advance.
INDEX BREADTH ENCOURAGING. A particularly en­couraging
aspect of the January advance in the Index
was its breadth - all four Index components rose. At
first, primarily the financial components of the Index
- national and area measures of real money -were
causing the Index to rise. This increase in financial liquid­ity
has in turn caused the rea/ components residential
construction and unemployment - to move favor­ably.
INITIAL UNEMPLOYMENT CLAIMS FALLING. The one
component of the Index remaining stubbornly unfavor­able
for the four months prior to January was initial
claims for unemployment insurance. Although the num­ber
of initial claims has declined the last three months,
the Index component- which is a five-month moving
average - just turned favorable in January. For 1982,
initial claims for unemployment insurance averaged
6,766 as compared with a seasonally adjusted 5,584 for
january. Initial claims exceeded 10,000 in both Sep­tember
and October, 1982.
HOUSING STARTS UP. Building permits issued for new
single-family houses in Allen County have risen for
seven consecutive months, from 17 last July to 34 in
january. As has been noted with respect to interpreta­tion
of the recent data on housing starts nationally, part
of the increase may be an aberration resulting from the
unseasonably mild winter; nevertheless, it still remains
encouraging that the mild weather in fact induced
something.
For 1982, new single-family building permits issued in
Allen County totaled 230, the lowest in the 14 years for
which records are available. It contrasts starkly with the
previous low of 328 permits issued in 1981 and the record
1,954 issued in 1978. (Duplexes are included and counted
as two single-family starts.)
INDEX OVERVIEW. The Index rose in january to 80.8
percent of its 1979 average. This was a two percent
increase over the 79.2 value in December. The Index has
risen eight of the last ten months and consecutively for
the last four months, after reaching the previous low of
77.1 last March.
Evaluating the Success of Fort Wayne"s Economic-Development Program
Millions are being pledged to an economic-development program for Fort Wayne. How can the success of these
planned expenditures be measured? There is a high probability that the root cause of failure for the Fort Wayne area
economy is not well understood, and an equally high probability that the measurement of success of the develop­ment
effort will be confused.
Like wildflowers in May, economic-development pro­grams
are springing up across Indiana, and Fort Wayne is
no exception.\2
Area media have repeatedly linked Fort Wayne's eco­nomic
decline with the misfortunes of International
Harvester, leading the public to the conclusion that the
problem with the Fort Wayne economy is I H. IH is only
part of the problem. More important is the structure of
the Fort Wayne area economic structure which IH epi­tomizes
and which pervades Indiana and its neighboring
states. This fact provides a basis for measuring the
success of individual economic-development programs.
Fort Wayne is part of the East North Central region
(Illinois, Indiana, Michigan, Ohio, and Wisconsin) which
during the latest national recession has suffered the
worst of the nine economic regions into which the U.S. is
officially divided. From January 1980 through March
1982, nonagricultural payroll employment in the ENC
region shrank 6.5 percent. (See Table 1)
Table 1. Regional Changes in Nonagricultural Payroll Employment,
March 1975 through March 19823
Region
New England
Middle Atlantic
East North Central
West North Central
South Atlantic
East South Central
West South Central
Mountain
Pacific
u.s.
Percentage Change*
Expansion Contraction Expansion and
Mar 75-Jan 80 Jan 80-Mar 82 Contraction
18.0 -0.2 17.8
7.9 -0.4 7.5
13.0 -6.4 6.6
18.3 -3.1 15.2
22.1 1.6 23.7
20.4 -3.0 17.4
29.2 9.8 39.0
33.2 4.0 37.2
27.2 1.3 28.5
1&8 -L5 1&3
*The same base - in thi s case, March 1975 - was used for determining both percentage
ex pansion and percentage con traction. This allows ca lculat ion of the net change over the
cycle (column 3) .
Compounding the problems of the region is the fact that
employment growth from the end of the 1973-1975
recession to January 1980 was next to the bottom at 13
percent. (See Table 1) When the effect of the recession is
subtracted from the previous expansion to obtain the
net gain in employment over the cycle4 (Table 1,
column 3), the ENC region is again last at 6.6 percent,
with the Middle Atlantic region (New Jersey, New York,
and Pennsylvania) running a close second at 7.5 percent.
In fact, all other regions experienced double-digit
expansion rates, with employment in the West South
Central and Mountain regions expanding by more than
a third.
Comparison of the Fort Wayne area and ENC region
economies (Table 2 and Figure 2) leads one to the con­clusion
that Fort Wayne shares the problems of the
region of which it is a part.
Table 2. Nonagricultural Payroll Employment for the Fort Wayne SMSA
and the ENC Region, March 1979 through September 1982*
Region Level** Change in Level
Mar 19793 Sept 1982 Persons Percentage
Fort Wayne SMSA 182,400 162,300 -20,100 -11 .02
East North
Central Region 16,893,400 15,953,400 940,000 - 5.89
* Indiana labor Market letter, Indiana Employment Security Divisio n, and Employment and
Earnings, Bureau of labor Statisti cs, U.S. Department o f labor.
* *March 1979 was the cyclical peak for employment in the Fo rt Wayne SM SA. Using it as the
base for calculations creates the maximum poss ible decrease for the SMSA when compared
with the ENC region or ot her Indiana met ropolitan areas (Tab les 2 and 3).
If the decline in employment in the Fort Wayne area had
matched the ENC region 's decline, 10,743 jobs (0.0589 x
182,400) would have been lost since March 1979. That
leaves 9357 (20,100-10,743) lost jobs to be accounted for
by special factors. Assuming a one-to-one ratio between
basic employment (eg., I H) and secondary employment
(eg., XYZ Cleaners), 4,679 basic jobs are available for
assignment to special factors. Clearly, the extraordinary
problems of I H have further debilitated an already weak­ened
area economy; however, employment in the area
and at IH would have fallen substantially regardless of
them. One need look no further than the decline in
industry sales of heavy-duty trucks (Figure 9, p. 5).
To reemphasize the point that Fort Wayne's problems
are more pervasive than I H, compare employment
among four Indiana metropolitan economies- Madi­son
County (Anderson), Bartholomew County (Colum­bus),
Allen County (Fort Wayne), and St. Joseph County
(South Bend). (See Table 3 and Figure 3)
Table 3. A Comparison of Nonagricultural Payroll Employment among
Four Indiana Metropolitan Economies, March 1979
through September 19S2*
City Level
Mar1979** Sept1982
Anderson 53,100 42,800
Columbus 33,163 28,111 (June)
Fort Wayne 182,400 162,300
South Bend 116,500 103,100
* Indiana Employment Securi ty Division
• •see Table 2
Change in Level
Persons
-10,300
- 5,052
-20,100
-13,400
Percentage
-19.40
-15.23 (June)
-11.02
-11 .50
Given the national media coverage of record high
unemployment rates in Anderson, it should not be sur­prising
that it fared the worst of the four areas. That Fort
Wayne suffered the smallest percentage decline may be
surprising, however, since Fort Wayne has shared with
Anderson the dubious distinction of receiving national
news coverage.
In fact each of these four metropolitan areas has had
its own version of the IH tale. The national media cover­age
was not always present, but the results were similar.
What observations relative to economic development
are to be drawn from the comparisons noted above, and
how should development success be determined?
2
• Certainly the Fort Wayne area economy has suf­fered
because of the problems of International
Harvester, but it is vitally important that we recog­nize
that the economy's problems are deep­rooted
problems, not individual company prob­lems.
Only then will the widespread political base
for a concerted economic-development effort be
firmly established.
• There is no excuse for not trying because "the
economic Gods have dealt Fort Wayne a knockout
blow." Each area in the ENC region has had its own
version of IH-the name changing, but the results
remaining similar.
• Fort Wayne's economic-development efforts
should be measured against the change in the
economic fortunes of the ENC region. Table 1
shows that the region's economic performance
has differed dramatically from the U.S. average.
Economists disagree as to how the region will fare
in any national economic recovery because they
disagree as to what portion of the recent employ­ment
losses is permanent (structural) versus cycli­cal.
Comparing Fort Wayne's economic perfor­mance
with that of the region eliminates the need
to resolve this issue; the relevant question be­comes,
((How is Fort Wayne doing vis-a-vis the
region?"
• By comparing the changes in Fort Wayne's em­ployment
with those of the ENC region (Figure 2L
one preempts politicians and others from taking
credit for employment growth resulting solely
from cyclical change, rather than from economic
development. That is, a rising trend line for Fort
Wayne relative to the trend line for the ENC
region will be clear proof of the success of the
economic-development effort.5 Failure of Fort
Wayne area employment growth to outpace ENC
regional growth will suggest an unsuccessful de­velopment
program.
But failure of the Fort Wayne area economy to
improve vis-a-vis the ENC region would not be
incontrovertible evidence of the failure of our
economic-development efforts. If everyone else
in the region also enters the economic-develop­ment
game and is successful, Fort Wayne will liter­ally
need to "run faster to keep pace." If this were
to occur, then simply keeping pace, rather than
outpacing, would be consistent with success.
11 n a February 8, 1983, article entitled, "City unveils loan plan to attract firms," the journal­Gazette
reported that "The city eventually expects to have a pool of up to $50 million, which
could be used for loans to industrial employers."
2The Greater Fort Wayne Chamber of Commerce: Five Year Strategic Marketing Plan, January
1983.
3Browne, Lynn E., " Two Years of Stagflation: A Regional Perspective," New England Economic
Review, Sept/ Oct 1982. Browne identifies four variables which account for 65 percent of the
difference in employment among regions. They are : industry mix, manufacturing earnings,
past rate of growth, and the farm sector.
•Officially, there have been two business cycles, given the brief expansion from january 19ijQ
through July 1980; however, for analytical purposes, the 1975-1982 period is assumed to have
constituted one business cycle. The ENC region did not share in the brief expansion.
SAn additional qualifier of success requires that job development also be efficient (i.e., that
expenditure per each job created be minimum).
Comparison Of Nonagricultural Payroll Employment
Figure 2.
~
II
""' "'
::r::
u
c.:
<
!
><
0
~
IN THE EAST NORTH CENTRAL REGION
(ILLINOIS, INDIANA, MICHIGAN, OHIO, AND WISCONSIN) AND THE FORT WAYNE SMSA
110..,...:.------------------'-------------.
100 -
901
-'
80 .
,,
\~ ,.,' ... ,",.,\
I
I
I
70 -+---,---- - T -------.·---r----r-----,---· ·,---- --
1975 1976 1977 1978 1979 1980 1981 1982 1983
3
FIGURE 3.
110 ...,------~A.::M.__:_O:::N_:G::....F:-0=-U=.:R..:..:M..:.:..E::.T.:..R:.:.O.:_:P_.O=_:L:I_.T::A._::N___A__R_:.E::_A__:S.__I_:N I_N_:_:D:__I__A::.N___A:'._ ___- -,
70 ~---,----,---,--~---,-----·~---~----
1975 1976 1977 1978 1979 1980 1981 1982 1983
'Data in Figure 2 are seasonally adjusted while data in Figure 3 are not. This accounts for the minor
differences between the Fort Wayne series in the two figures.
Figure 4.
1600
1550
1500 -
1450
1400
1350
1300
1250
1200
1150
1100
74
Figure 5.
1.30 I
1.25 -J
1.20 -1
t
1.15 I
1.10 .
1.05
1.00
0.95
75
GNP AND FINAL SALES - CONSTANT (1972) DOLLARS
- - - - - - - - - - - - ,--- /:: -_, .._' -
I '
76 77 78 79 80 81 82
TOTAL WAGE & SALARIED EMPLOYMENT- U.S. & FORT WAYNE SMSA
/41' .,'•\/I l 1
- - - - - - , ... - - - - ,-
' .. -...
83
0.90 -f-.--....,-.-.-.-.-r'-.-.-,-..,..,...,.~,.,.,..,...,...,.,....,-.-..,-.~..,..,~ r.-~~~..,. '
84
N ~ ~ 77 n n oo ~ ~ ~ 84
YE.AJ' ( 1 ~;XX J
'Figure 6. WAGE AND SALARIED EMPLOYMENT- FORT WAYNE SMSA
119800 -~ ---- I= "I- ---;=c===:::<----,
,::jr ---~ -
:l 150
0
:t:
.... 140
NONDURABLE GOODS
~
~130 / ................... ~:::! 120 1 I
110~
100 __.............! -~ NONMANUFACTURING
SELECTED AREA ECONOMIC INDICATORSl
Latest Month; Latest Prior Year Percenta~e Chan~e From Short-
Number of Value Month's Ago Prior Year Ago run
Months Averaged Value Value Month lmpact2
Composite Index of Leading Indicators,
1979 = 100 (Area) 80.8 79.2 77.7 2.0 4.0 +
Employment, in thousands (Fort Wayne
SMSA)3
Total Wage & Salaried4 JAN 156.3 158.5 166.9 -1.4 -6.4
Manufacturing 45.5 45.7 51.4 -0.4 -12.9 0
Durable Goods 34.1 34.3 40.0 -0.6 14.7 0
Non-Durable Goods 11.4 11.4 11 .4 0.0 0.0 0
Non-Manufacturing 111.7 112.8 116.6 -1.0 -4.2
M iscellaneous 73.0 72.9 75.3 0.1 -3.1
Retail Trade 28.4 29.3 30.0 -3.1 -5.3
Wholesale Trade 10.3 10.6 11 .3 - 2.8 -8.8
Unemployment (Fort Wayne SMSA)3
Rate 12.8 12.1 12.8 5.8 0.0 0
New Unemployment Claimss JAN;3 6686 8484 7308 -21 .2 -8.5 +
Finance (balance sheet level in millions for
five Fort Wayne banks)G JAN;3
Total Bank Deposits, Current Dollars 1726.2 1713.4 1625.2 0.7 6.2 +
Total Bank Deposits in Constant (1967)
Dollars7 642.2 638.1 635.1 0.6 1.1 +
Housing, New Single-family (Allen
County)6 JAN;6
Building Permits 25 22 19 13.6 31 .6 +
Zoning Permits 22 20 17 10.0 29.4 +
Transportation Retail Sales (U .S.)9
Trucks
Heavy Duty JAN;3 10,881 10,115 13,287 7.6 -18.1
JH Market Share, Percentage1 ;13 24.9 25.0 30.1 -0.4 -17.2
Medium Duty ;5 3,822 3,588 4,831 6.5 -20.9 +
IH Market Share, Percertage1 ;13 35.1 34.1 25.2 2.9 39.3 +
Light Duty ;3 180,481 174,013 144,345 3.7 25.0 +
Autos, Annualized Rate in Millions
Domestics ;3 5.214 5.101 4.453 2.2 17.1 +
Imports ;3 2.168 2.089 1.962 3.8 10.5 0
Miscellaneous
Industrial Electricity Sales in Million
Kilowatt Hours (Areapo JAN;5 71.053 71 .956 77.075 -1 .3 -7.8
1AII data series are seasonally adjusted except truck market share. Shaded areas in the figures delineate official recessionary periods. The
latest recession started in July 1981. Its end is not officially established until some considerable period of time has elapsed from its occurrence.
2+ =favorable; 0 =neutral; -=unfavorable 1 JSource : Indiana Employment Security Division
4Total wage and salaried employment shown on page 1 and the table is not equivalent to the summation of categories of employment in Figure 6
and the table because (1) the process of deseasonalizing produces some minor differences and (2) employees on strike are counted as employed
in the former and as unemployed in the latter. (Note, for example, the impact of the IH strike during the middle of the 1980 recession in Figure 6.)
5Combination of Fort Wayne and Auburn offices
GData compiled by Community Research Institute. Sources: Anthony Wayne Bank, Fort Wayne National Bank, Indiana Bank & Trust Co.,
Lincoln National Bank & Trust Co., and Peoples Trust Bank.
?Deflator used is the CIP-U with the experimental rental equivalence approach to measurement of housing costs. (This will become the
official CPI-U starting in 1983.)
SData compiled by Community Research Institute. Sources : Allen County Planning Commission, Fort Wayne Community Development &
Planning Department, and City-County Building Department.
9Source: Motor Vehicle Manufacturers Association of the United States, Inc.
10Data compiled by Community Research Institute. Source : Indiana & Michigan Electric Co.
4
Figure 7. BUILDING PERMITS- U.S. AND ALLEN COUNTY
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3 - - - - ----------------- - - - - - '" \---- -
0.2 ' ' ~
~ ' ......... - 0.1
0.0
74 75 76 77 78 79 80 81 82 83 84
Figure 8. FORT WAYNE AREA INDUSTRIAL ELECT USAGE- 5 TERM MA
100
95
90
85 .
80
70 - - - - - - --- -
65
60
74 75 76 77 78 79 80 81 82 83 84
Figure 9. HEAVY DUTY TRUCK SALES- 3 TERM MA
25 -r-=c=o=-r------------,-=-,..----.~--==1
I
20
I ----------------- r- ---
10
5 +-~-.-.--r'~~~~~~~~~~,.,.,..,..~~·~~~~~~~
N ~ ~ 77 n n oo ~ ~ 83 84
5
How Do Area Wages Really Rank?
The common perception that Fort Wayne is a ~high wage ~ area is not supported by data from the U.S Bureau of
Labor Statistics. The area may have some figures from the occupational classifications which are ~high wage~~ but
when occupational mix differences among geographical areas are eliminated~ Fort Wayne has composite wage rates
below the national average. 1
It's an economic fact of life that Fort Wayne is a rela­tively
high wage area. Right? Wrong. According to statis­tics
collected and published annually by the U.S. De­partment
of Labor, the Fort Wayne SMSA (Adams, Allen,
DeKalb, and Wells counties) is below the national aver­age
in all three occupational groupings surveyed. Ac­cording
to published data for 1981, the latest year avail­able,
Fort Wayne was 93, 94, and 98 percent of the
national average in the office clerical, skilled mainte­nance,
and unskilled plant occupational groupings,
respectively. Thus, in 1981, the average wage for office
clerical workers in the Fort Wayne SMSA was 93 percent
of the average wage level nationally, or 7 percent below
the national average. The nationwide data are deve­loped
by analyzing data from 70 areas representing all
standard metropolitan statistical areas (SMSA' s) of the
United States (excluding Alaska and Hawaii).
Table 4 contains the relative pay level rankings for
selected areas for 1980 and 1981. The only change in Fort
Wayne's ranking from the previous year was an increase
of one percentage point, from 97 to 98, in the unskilled
plant occupational category.
Table 4. Relative Pay Levels for Selected Areas for 1980 and 19812
1980 1981
AREA Office Skilled Unskilled Office Skilled Unskilled
Clerical Maintenance Plant Clerical Maintenance Plant
Fort Wayne
Ann Arbor, Ml
Battle Creek, Ml
Bloomington-Vincennes, IN
Decatur, IL
Lima, OH
Mansfield, OH
Peoria, IL
Austin, TX
Knoxville, TN
Macon, GA
Raleigh-Durham, NC
Shreveport, LA
93 94
109 119
NA NA
88 97
106 109
102 100
94 107
122 NA
86 79
90 88
83 93
90 88
88 88
97 93 94 98
130 99 118 121
NA 120 107 142
112 87 95 115
151 108 109 149
113 100 101 112
101 93 108 99
135 127 115 139
63 87 77 65
85 89 90 89
80 83 95 78
84 90 86 83
74 89 88 77
2Data fro m Wage Diffe rences among Selected Areas, 1981, U.S. Department of Labor, Bureau of Labor Statistics, October, 1982.
Table 4 confirms the oft-reported fact that compo­site
wage rates in the Fort Wayne area, and the Lakes
States in general, exceed representative rates in the
South; however, for firms limiting their locational search
to the Lakes States, composite wage rates in the Fort
Wayne area are very competitive. (See Insert," A Primer
on Industrial Location," for a discussion of determinants
of industrial location.)
6
The occupations comprising the three occupational
groupings, along with national averages for manufactur­ing
and non-manufacturing wages, as of July 1981, are
shown in Table 5. These actual wages are consistent with
the Index value of 100 in Table 4 for 1981 .
Table&. Make-up and Average Straight-time Weekly Earnings of Occupations
Comprising Table 4 Groupings, July 19813
Office clerical:
File clerks I, II, and Ill
Key entry operators I and II
Secretaries
Stenographers I
Switchboard operators
Typists I and II
Skilled maintenance :
Carpenters
Electricians
Machinists
Mechanics (machinery)
Mechanics (motor vehicles)
Painters
Pipefitters
Tool and die makers
Unskilled plant:
Janitors, porters,
and cleaners
Material handling laborers
3Data from Occupational Earnings in Al l Metropolitan Areas, july 1981, U.S. Department of
Labor, Bureau of Labor Statistics, August, 1982.
1The Department of Labo r uses procedures whi ch eliminate inter-area differences in occu­pational
composition as a facto r in determining pay levels. For example, one geographica l
Manufacturing Nonmanufacturing
$206.50 $173.00
238.50 219.00
305.00 279.00
274.00 268.00
255.50 200.50
234.50 197.50
419.20 389.20
452.40 444.00
426.80 466.00
421.20 409.60
413.60 428.40
428.80 348.40
462.40 446.40
454.40 XX
286.40 185.60
283.60 336.40
area may have a relat ive ly high wage for o ne particu lar occupat ion which constitutes a large
proportion of the employment in the area. In calcu lati ng the wage relat ive for the area, the
particu lar occupation is weighted according to its proportion of national employment, not
area employment. Therefore, if the area has relative ly low wages rates in ot her occupations,
it can accrue a low - o r favo rable- wage relative.
Eighth AnnuaiiPFW Business Conference
Will Feature Dr. Richard Lesher
IPFW's Eighth Annual Business Conference is sched­uled
for Thursday, March 31. The Conference, pre­sented
by the university's division of business and eco­nomics
in conjunction with the Indiana University at
Fort Wayne Alumni Association, will start with a lunch­eon
at the campus. Following the luncheon will be the
keynote address by DR. RICHARD LESHER, president of
the United States Chamber of Commerce.
Also featured will be the presentation of the presti­gious
Corporate Merit Citation and recognition of
IFPW's 1983 Distinguished Business Alumnus. The after­noon
segment of the conference will consist of a brief
economic update and forecast presented by Thomas
Guthrie, director of the university's Community Rela-tions
Institute, and George Bullion, chair of the divi­sion
of business and economics. This will be followed by
a panel discussion on high technology and its potential
impact on northeastern Indiana. The panel members
have been selected from the board of directors of the
Summit Technical and Research Transfer (START) Cen­ter.
The panel moderator will be Dr. Warren Worthley,
executive director of START and associate dean of the
IPFW School of Engineering, Technology, and Nursing.
Reservations for the Eighth Annual Business Confer­ence
may be made by calling (219) 482-5343 or writing
the IPFW Alumni Office, 2101 Coliseum Boulevard East,
Fort Wayne, Indiana 46805.
7
A Primer on Industrial Location
by Anthony Loviscek1
Nothing affects the economic well-being of a region
more than the expansion or contraction of its economic
base. The base is affected by the make-up and number of
industries migrating to and from the region. This raises a
pivotal question: Why do industries choose to locate in
one region as opposed to another? Does the decision
depend primarily on differentials in labor, transporta­tion,
and energy costs? Is the decision based on regional
differentials in population growth and resulting market
potential? Are industries interested primarily in ameni­ties,
or are they searching for regions with the lowest tax
burdens?
OVERVIEW: Analysts give a qualified ((yes" to all of the
questions above.l ndustries respond to changes in costs,
but responsiveness varies with production technologies
and the locations of the final markets for their products.
That is, some industries are capital-intensive (e.g., petro­leum);
some are labor-intensive (e.g., textiles); some are
energy-intensive (e.g., chemicals); and some rely exten­sively
on all three inputs (e.g., automobiles and steel).
The technologies embodied in production processes
determine to what extent industries can substitute an
inexpensive input for an expensive one.
A firm's location decision reflects a long-term com­mitment.
The high cost of relocation generally prohibits
many industries, particularly manufacturing, from mov­ing
before their facilities are at least 20 years old. This
means that changes in factors affecting costs will have a
subtle and gradual effect on industry location.
Theory and evidence suggest that the following are
primary determinants of industrial location: transporta­tion
costs, labor costs, energy costs, and market growth,
with secondary factors being amenities and taxes.
TRANSPORTATION COSTS: Classical location theory,
as developed and refined over the past 60 years, is based
on transport-cost minimization. An industry has the
choice of locating where inputs are abundant, near the
market for its product, or at an intermediate point. The­ory
suggests that the location chosen will be the one that
minimizes the combined costs of transporting the inputs
and the product.
The location decision, according to theory, is strongly
influenced by whether the final product is 0 Weight­losing"
or ((weight-gaining." For example, steel mills
located in the Pittsburgh area are close to both the coal
fields of West Virginia and superior rail and barge facili­ties.
Automobile manufacturing does not have the
((weight-losing" characteristic of steel production. It
tends to be ((weight-gaining" and therefore market­oriented
in its location decisions.
Technological progress in the transportation indus­try
has led to increased availability of truck and air trans­port
as opposed to water and rail. This has given industry
an offering of fast, flexible, and dependable service with
declining unit-transportation costs. Additionally, inno­vations
in production processes often lead to a lighter
product. A good example is the plastics and light metals
used to produce automobiles today, compared with the
materials used two decades ago. These innovations,
coupled with changes in transport modes, have led to
declining terminal and line-haul costs. This has decreased
the importance of transportation costs as the primary
determinant of location, and the trend is likely to
continue.
LABOR COSTS: The developers of classical location
theory recognized that transport cost minimization is
not the only major variable affecting location decisions.
In fact, they demonstrated that industries will move to a
location that has large pools of relatively inexpensive
skilled labor if savings in the wage bill more than offset
the additional costs incurred. Obviously, a region must
be able to maintain its status as a low-labor-cost region.
Economic theory predicts that regional wage differen­tials
will disappear over time: As labor-intensive indus­tries
move into the region, they bid up wage rates, and
the region loses its comparative advantage. If regional
population growth outstrips employment growth, how­ever,
the labor cost advantage may be maintained.
Considerable evidence suggests that much of the
South - particularly the Carolinas, Florida, Georgia,
Alabama, and Texas- has a comparative advantage in
labor costs over other regions. This holds true even after
controlling for differences in the mix of industrial output
among regions. Not surprisingly, wages have been rising
at a faster rate in this region than in others, thereby
reducing regional wage differentials. Yet it is likely that
the gap will remain significant because the increase in
the region's population growth in the last 10 years was 21
percent, almost double the nation's 11 percent growth.
Note, however, that the South has had a comparative
advantage in labor costs for generations, yet a noticeable
shift in industry from North to South has occurred only
in the last 25 years. Thus, it is likely that industries have
built large-scale operations in the South recently for
reasons other than labor costs.
ENERGY COSTS: The quantum leap in energy prices in
the 1970's undoubtedly caused severe shifts in produc­tion
and transportation costs among regions. It has led
some analysts to infer that as energy-rich states (e.g.,
Kentucky, Oklahoma, Texas, West Virginia, and Wyom­ing)
realize substantial gains in real income, they will
enjoy expanding markets that will attract industries from
the Industrial Heartland (i.e., New York, New Jersey,
Pennsylvania, Ohio, Michigan, Indiana, and Illinois)
which is energy-poor (i.e., it is a net importer of energy
resources). Furthermore, rising energy prices increase
transportation costs, thus increasing the relative impor­tance
of this location determinant. Nevertheless, whether
rising energy prices will play an important role in indus­trial
location depends on several factors.
1. Energy costs must be a significant portion of total
costs.
2. The increase in the real price of energy must be
sustained.
3. The differentials in regional energy costs must be
significant.
Some industries whose location decisions depend sub­stantially
on energy costs are aluminum, chemicals,
steel, glass, cement, and utilities. If rates of hydro-
generated electricity climb sharply, as some analysts
predict, the industries affected may begin moving else­where.
MARKET GROWTH: Market orientation of industrial
activity is due largely to technological progress in trans­portation
services. Since the beginning of the century,
we have witnessed a concentration of manufacturing
activity, primarily in the Northeast, decentralize to the
Great Lakes Region, the Midwest, and the deep South.
Decentralization has occurred within regions as well.
More industries are locating along the perimeters of
urban sprawls, in small towns, and in rural areas. Evi­dence
suggests that these decentralizations are occur­ring,
not because of differentials in regional transporta­tion,
labor, or energy costs, but because of differentials
in market growth. In other words, firms tend to locate
where demand for their output is growing the fastest.
This may explain the dilemma noted above as to why the
South has just recently experienced substantial devel­opment,
although it enjoyed a labor cost advantage for
decades. Historically, markets expanded briskly in the
Northeast, leading to large-scale capital investments in
that area. Gradually, industry moved west to the Great
Lakes Region, where markets expanded into the major
manufacturing centers of Cleveland, Detroit, and Chi­cago.
In particular, research has shown that western
Pennsylvania lost much of its steel industry because
markets were expanding more rapidly in the Great Lakes
Region. This expansion was not due to any particular
advantage that the Great Lakes Region had in transporta­tion
or labor costs. The same can be inferred about
present trends in the South. Its growth rate in real
income, approximately four percent in the last 10 years,
has exceeded the approximately one percent expe­rienced
in the Industrial Heartland. Industries may be
moving south primarily due to differentials in regional
output demand.
However, this is not to say that industries based in the
Industrial Heartland are moving (( lock, stock, and bar­rel"
to the South. Evidence shows that industries are
setting up more branch offices and plants in the South
than elsewhere. A fundamental and critically important
reason why some industries, notably automobile and
steel, have shut down plants in the Industrial Heartland
is decreased demand for their products as a result of the
severe cyclical downturn in national economic activity.
The South has also had its share of closings, but the
Industrial Heartland feels the brunt of such downturns
for two reasons. First, more consumer-and-producer
durable industries are located north of the Ohio River
than south of it. Second, many northern-based plants are
older and require costlier technologies than southern­based
plants. When coupled with higher labor costs in
the North, northern-based plants will usually close first,
other factors being equal.
AMENITIES: Research and development facilities are
not influenced as strongly by transportation, labor, and
energy costs as by amenities. In other words, these
industries look in particular for areas that have favorable
cultural·, social, topographical, and economic condi­tions.
For example, IBM and other computer-related
concerns have large research facilities in the Raleigh­Durham
area of North Carolina. This area not only has
quality educational institutions which provide a steady
supply of skilled labor, but it also offers a scenic and
climatic environment conducive to research efficiency.
This is not to say that non-research and development
industries are not concerned with amenities. They are
definitely concerned about right-to-work laws and polit­ical
attitudes towards business, ranging from environ­mental
legislation to regulatory structure. However, it is
difficult to assess the relative importance of these qualita­tive
factors for industrial location. Cost savings in trans­portation,
labor, and energy (unless overwhelming) will
not induce industrial relocation without what firms per­ceive
to be an adequate environment, broadly defined.
TAXES: Theory and evidence suggest that taxes play a
secondary, possibly a minor, role in industrial location.
Politicians tout taxes as a primary determinant of loca­tion;
however, state and local taxes are generally no
more than five percent of total sales, and often less.
Conversely, wages and salaries for most ·industries are at
least 50 percent of sales, while energy costs for some
industries (e.g., construction and chemicals) exceed 10
percent of sales. Low tax rates may mean fewer govern­ment
services, or services of poor quality, but well­paved
roads, quality education, and the arts are desir­able.
It is quite likely that tax-rate differentials, assuming
the tax base is the same, play a role in selection of a site
within a region, not in selection of a region. The indica­tion
is that once a firm has chosen its regional location
based on some combination of the factors previously
mentioned, it will then search for areas in the region that
offer lower tax rates. Theory suggests that many indus­tries
are able to transfer a significant portion of taxes to
suppliers, labor, consumers, and stockholders in the
form of reduced input prices, lower benefits, higher
prices, and lower dividends. This transfer of the tax
burden helps to diminish the importance of taxes to the
location decision.
CONCLUSION: Given this nation's diverse economic
structure, it is difficult to assess the degree to which each
of the factors discussed above affects industrial location.
However, location decisions are in general affected sig­nificantly
by differentials in regional labor costs and
market growth, with consideration given to tranporta­tion
factors, energy costs, and amenities available to
firms and their workforces.
1Antho ny Loviscek is an ass istant professor of business and econo mics at IPFW. His primary
research interests are in regional and urban economics.
FORT WAYNE AREA WAGE HISTORY- MARCH, 1983
This is the second in what is planned to be a periodic report in IMPACT of wage rates in the
Fort Wayne area. The data come from (1) the Area Wage Survey conducted annually in June by
the Bureau of Labor Statistics} Department of Labor; and (2) the Occupational Wage Survey
conducted biennially in September by the Indiana Employment Security Division. The sample
sizes in both surveys are substantial} although the geographical areas covered differ. For example}
in 1982 the Area Wage Survey chose a sample of 91 firms employing 44}503 persons to represent
370 firms (of at least 50 employees each) employing 92}180 persons in the Fort Wayne SMSA
(Adams} Allen} DeKalbJ and Wells counties). In 1982 the Occupational Wage Survey was a
summary of data from 95 firms employing 22}267 persons in occupations included in the survey.
The 95 firms were located exclusively in Allen County} did not exclude firms employing fewer
than 50 persons} and included only manufacturing industries.
Because of the three differences noted above in the two surveys and for several other reasons}
comparison of wage rates between the two surveys should be made with caution. Conversely}
when the differences are given proper consideration} the history of wage rates communicates
unambiguous} clear trends for most occupational classifications.
4
Job descriptions used in the two surveys available upon request.
Data from Area Wage Survey} U.S. Department of Labor} Bureau of Labor Statistics.
Data from Occupational Wage Survey} Indiana Employment Security Division.
Percentage change from the comparable survey one year (in the case of the Area Wage
Survey) or two years (in the case of the Occupational Wage Survey) earlier. The two-year
change is the equivalent compounded annualized rate.
Excludes premium pay for overtime and for work on weekends} holidays} and late shifts.
Incentive payments} such as those resulting from piecework} production bonuses} and
commission systems} are included in the wages reported; nonproduction bonuses are
excluded. Cost-of-living allowances are considered as part of the workers} regular pay.
Hourly earnings reported for salaried workers are derived from regular salaries divided by
the corresponding standard hours of work. The median designates the rate for which half
of the workers receive the same or more and half receive the same or less. The middle
range is defined by two rates of pay- a fourth of the workers earn the same or less than
the lower of these rates and a fourth earn the same or more than the higher rate.
Occupation'
Non-exempt
Computer data librarians
Computer operators
Computer operators I
Computer operators II
Computer operators Ill
Drafters
Drafters I
Drafters II
Drafters Ill
Drafters IV
Drafters V
Electronics technicians
Electronics technicians I
Electronics technicians II
Electronics technicians Ill
File Clerks
File Clerk I
Key entry operators
Key entry operators I
Key entry operators II
Secretaries
Secretaries I
Secretaries II
Secretaries Ill
Secretaries IV
Secretaries V
Stenographers
Stenographers I
Stenographers II
Switchboard operators
Typists
Typists I
Typists II
Maintenance
Boiler tenders
Carpenters
Electricians
Machinists
Mechanics (machinery)
Mechanics (motor vehicles)
Painters
Pipefitters
Stationary Engineers
Tool and die makers
General maintenance workers
Production
Forklift operators
Guards
Guards I
Janitors, porters, and cleaners
Labor
Labor, skilled
Labor, semi-skilled
Labor, unskilled
Material handling laborers
Shipping packers
Truckdrivers
Truckdrivers, medium truck
Truckdrivers, heavy truck
Footnotes overleaf.
% Change
In Median•
9.81
9.11
6.51
12.49
14.24
12.28
19.95
6.86
9.68
5.37
4.9
8.74
September, 19823
Hourly Earnings5
Median
8.2
6.75
7.17
6.2
14.03
10.96
12.56
12.56
12.57
10.06
9.76
7.97
Middle
Range
6.55-10.45
6.20- 9.63
6.20- 8.93
4.90- 8.33
12.38-14.14
9.23-12.70
9.36-12.66
11 .57-14.11
12.05-13.20
8.88-11 .83
8.29-11 .75
7.51-11 .17
%Change
In Median
NA
5.60
4.58
7.07
15.07
3.96
NA
43.98
-8.37
18.93
-16.03
NA
54.99
NA
NA
-19.66
NA
3.42
2.32
25.79
10.89
13.45
14.94
10.67
10.58
-7.65
7.47
NA
NA
26.46
11.52
-5.46
17.46
NA
44.39
13.69
16.91
3.60
-6.15
NA
9.79
10.92
13.48
NA
7.71
-35.33
-42.43
-10.67
NA
NA
NA
13.64
-1.99
4.32
14.69
-3.94
Median
NA
7.36
5.48
7.42
9.47
6.66
NA
6.61
7.01
10.24
9.17
9.20
11 .19
8.56
10.44
4.46
4.i3
5.75
5.30
7.17
6.62
5.62
6.31
6.74
7.21
7.00
7.34
NA
7.34
6.32
5.52
4.85
5.65
NA
13.63
11.40
10.23
10.39
6.90
NA
12.78
10.77
12.04
7.75
9.06
4.10
3.65
3.35
NA
NA
NA
9.06
6.91
6.45
9.29
7.32
June, 19822
Hourly Earnings
Mean
NA
7.85
5.77
8.15
9.15
9.03
NA
6.44
7.95
10.37
9.65
9.26
9.64
6.39
9.94
4.64
4.35
6.33
5.55
7.26
7.01
6.23
7.37
7.03
7.65
7.47
6.22
NA
6.61
6.41
6.13
5.17
6.69
NA
12.61
11.33
10.09
10.42
9.53
NA
11 .54
11 .63
12.13
6.15
9.14
6.73
6.52
4.40
NA
NA
NA
8.90
8.16
9.05
9.93
7.09
Middle
Range
NA
6.38- 8.99
5.25- 6.18
6.56- 6.96
8.04-10.50
7.00-10.24
NA
NA
6.52- 9.06
9.75-12.26
7.62-12.74
7.69-11.19
7.67-11.19
7.50- 6.56
6.65-11.61
4.15- 5.06
3.79- 4.64
5.00- 7.14
4.90- 6.06
5.72- 8.77
5.93- 7.60
5.28- 6.61
5.11-10.63
6.27- 7.65
6.26- 6.19
7.00- 7.50
6.54-10.49
NA
6.97-10.90
5.24- 6.69
4.99- 6.64
4.30- 5.82
5.32- 6.64
NA
12.29-13.63
10.07-12.78
6.49-10.65
6.07-12.76
8.64-10.34
NA
6.29-12.78
10.77-13.80
11 .17-12.97
7.00- 6.60
7.65-10.69
3.55- 9.32
3.55- 9.32
3.55- 4.00
NA
NA
NA
7.06-11.35
6.90- 9.53
8.45- 9.65
6.25-13.34
6.45- 7.32
%Change
In Median
NA
16.0
6.9
7.6
6.5
6.3
NA
NA
5.1
3.2
15.4
NA
14.2
NA
NA
3.1
NA
6.4
7.7
5.4
6.0
8.0
6.6
5.7
7.2
14.6
9.6
NA
NA
14.4
5.6
17.1
1.7
11.4
-13.1
2.6
7.4
23.3
10.7
3.0
18.4
6.0
2.5
NA
7.7
73.7
61.1
7.1
NA
NA
NA
12.6
5.4
0.6
NA
4.4
Median
5.65
6.97
5.24
6.93
6.23
6.33
6.37
5.96
7.65
6.61
10.92
NA
7.22
NA
NA
5.59
NA
5.56
5.16
5.70
5.97
5.13
5.49
6.09
6.52
7.58
6.83
6.83
NA
4.92
4.95
5.13
4.61
9.44
9.44
10.01
8.75
10.01
9.69
6.62
11 .64
9.71
10.61
NA
6.43
6.34
6.34
3.75
NA
NA
NA
7.99
7.05
8.1
6.1
7.62
june, 19812
Hourly Earnings
Mean
6.10
7.16
5.15
7.35
6.47
8.53
7.49
6.12
7.34
9.23
11 .00
NA
7.68
NA
NA
5.60
NA
5.86
5.65
6.20
6.32
5.35
5.67
6.64
6.67
7.36
7.73
8.25
NA
5.41
5.38
5.27
5.46
9.76
10.30
10.55
9.14
9.56
9.64
9.69
11.37
10.76
11 .15
NA
6.42
6.62
6.80
4.95
NA
NA
NA
7.95
7.99
6.56
7.62
7.05
Middle
Range
NA
5.46- 6.15
4.32- 5.50
6.13- 7.96
6.02- 6.93
7.06- 9.94
NA
5.24- 6.83
6.44- 6.00
6.33- 9.99
10.02-11.92
NA
6.15- 9.42
NA
NA
4.14- 6.99
NA
4.64- 7.04
4.62- 6.37
5.20- 7.05
5.40- 6.74
4.91- 5.50
5.16- 6.12
5.75- 6.74
5.99- 7.03
5.70- 6.77
6.02- 9.75
6.46-11.34
NA
4.25- 6.22
4.49- 5.65
4.71- 5.78
4.30- 5.56
6.47-11 .86
8.09-12.77
9.71-12.12
6.30-10.00
7.20-12.12
6.50-10.34
6.62-12.32
10.01 -12.20
9.42-12.93
10.61-12.21
NA
6.65- 9.15
3.57- 9.69
3.55- 9.36
3.35- 6.61
NA
NA
NA
6.50-10.61
6.82-10.29
7.49- 9.00
7.49- 6.10
6.41- 7.71
%Change
In Median
-3.5
21.2
9.5
8.0
15.5
6.9
2.7
11.6
9.8
9.1
11.4
-0.7
September, 198()3
Hourly Earnings
Median
6.8
7.35
6.32
4.9
10.75
8.71
6.73
11.00+
10.45
9.06
6.67
6.74
Middle
Range
5.95- 6.20
5.55- 6.17
5.50- 7.67
4.50- 5.50
9.25-xx
7.46- 9.84
7.91-xx
9.90-xx
10.04-xx
6.07-10.66
7.29-10.37
4.96-10.22
%Change
In Median
NA
2.4
3.6
.20.6
9.5
6.0
NA
NA
12.0
9.3
7.1
9.5
7.6
NA
NA
42.6
NA
17.4
15.1
4.4
7.6
6.4
6.9
11.2
7.8
3.4
9.3
NA
NA
1.2
18.5
11.7
9.0
6.7
14.8
15.1
4.2
6.0
7.5
17.7
11 .1
12.5
14.2
NA
7.5
-6.7
-12.5
0.0
NA
NA
NA
19.2
7.7
9.5
NA
13.3
Median
NA
6.01
4.90
6.44
7.73
7.69
NA
NA
7.26
8.34
9.46
6.52
6.32
NA
NA
5.42
NA
5.13
4.61
5.41
5.53
4.75
5.15
5.76
6.08
6.60
6.23
NA
NA
4.30
4.68
4.36
4.73
6.47
10.66
9.74
6.15
6.12
6.75
6.56
9.63
9.15
10.35
NA
7.83
3.65
3.50
3.50
NA
NA
NA
7.08
6.69
6.05
NA
7.30
June, 198()3
Hourly Earnings
Mean
5.41
6.26
4.91
6.34
7.90
7.65
6.53
NA
7.16
6.33
9.62
6.38
6.76
NA
NA
4.71
NA
5.19
4.96
5.67
5.78
4.66
5.49
6.10
6.06
6.43
6.16
NA
NA
4.95
4.84
4.61
4.97
9.00
9.59
9.77
6.55
6.42
8.67
8.16
9.96
9.62
Middle
Range
NA
5.09- 7.45
4.12- 5.51
5.54- 7.16
7.30- 8.64
6.94- 8.79
NA
NA
6.73- 7.55
7.56- 6.66
8.64-10.35
7.65- 9.25
6.15- 6.66
NA
NA
3.63- 5.57
NA
4.36- 5.82
4.20- 5.71
4.63- 6.49
5.00- 6.20
4.46- 5.22
5.71- 9.66
5.24- 6.54
5.53- 6.41
5.16- 7.39
4.83- 7.62
NA
NA
4.25- 5.47
4.25- 5.07
4.16- 5.07
4.33- 5.17
7.80-10.90
7.64-11.22
6.64-11 .14
7.65- 9.74
6.66-10.66
6.00- 9.66
6.40- 6.56
9.75- 9.63
9.03-10.95
10.39
NA
10.12-11.29
NA
7.60
5.26
5.24
4.55
NA
NA
NA
7.13
7.36
6.09
NA
7.29
6.34- 8.97
3.10- 7.80
3.10- 7.60
3.10- 5.85
NA
NA
NA
5.13- 9.03
5.96- 9.30
6.69- 6.40
NA
6.02- 8.30
COMMUNITY RESEARCH INSTITUTE
INDIANA UNIVERSITY-PURDUE UNIVERSITY
AT FORT WAYNE
2101 COLISEUM BOULEVARD EAST
FORT WAYNE, INDIANA 46805
The publication of IMPACT is being initiated by the
recently formed Community Research Institute of IPFW to
provide basic information to the northeastern Indiana area
business community in a timely manner. This publication is
coordinated through the Economic Development Group
of the Greater Fort Wayne Chamber of Commerce. The
initial funding of the Institute has resulted from a joint
effort of IPFW and the Fort Wayne Corporate Council.
Persons providing substantial guidance to the publication
of IMPACT include the following :
Faculty
joseph P. Giusti, Chancellor
Edward A. Nicholson, Jr., Dean of Faculty
George W.M. Bullion, Chairman, Division
of Business & Economics
Janelle Graber, Research Assistant
Advisors : Robert Cockrum, Edwin Leonard, Jr., Anthony
Loviscek, John Manzer, James Moore, Ali Ras­suli,
Zoher Shipchandler, David Swinehart
Chamber of
Commerce
Advisors : Richard Bonsib (Chairman), Karl Bandemer,
Larry Brunke, Robert Delaney, Jr., Joe Gilles­pie,
Rick Herman
Thomas L. Guthrie, Editor, IMPACT, and Director, Com­munity
Research Institute
BULK RATE
NONPROFIT ORG.
U.S. POSTAGE
PAID
PERMIT NO. 92
FORT WAYNE. IN 46805

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Business Review for
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170
FORT WAYNE SMSA
TOTAL WAGE AND SALARIED EMPLOYMENT
COMPOSm INDEX OF AREA LEADING INDICATORS
160 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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78 79 80 81 82 83 84
Vol. 2 No.1 Community Rese .. rch Institute, Bure .. u of Business & Economic Rese .. rch
lndgn .. University - Purdue University .. t Fort w .. yne
FEBRUARY-MARCH 1983
Index Continues Up; Employment Still Continues Down
The Leading Economic Indicators Index for the Fort Wayne Area had its largest monthly rise in january since
bottoming last March. The breadth of the Index was also impressive in that all four components moved favorably in
january; however~ area employment resumed its drift downward in the last quarter of 1982.
The Composite Index of Leading Indicators for the
Fort Wayne area rose over one and one-half points in
January, the biggest jump since it began last April what
has proved to be a laborious turnaround effort.
AREA EMPLOYMENT TREND STILL DOWN. Area em­ployment
has eroded an additional2,000 since October,
after holding steady through the summer. Hidden
within the aggregates was the encouraging fact that the
loss in employment occurred exclusively in the non­manufacturing
sector of the economy. Manufacturing
employment actually increased by 100. Area wage and
salaried employment in January was a seasonally adjusted
156,300. That the employment trend continues to resist
its forecasted turnaround has two primary reasons. (1) It
is to be expected that the downward momentum built
up over what by March will be four years will take a
relatively long time to reverse; (2) area economic activity
- as measured by employment - continues to suffer
from the phased pullout of International Harvester
truck-manufacturing operations. The area is programmed
for a direct loss of 2100 jobs over the remainder of the
year. Whether this programmed loss plus any ripple
losses will be more than offset by increases in the
remainder of the economy d-epends primarily upon the
strength of the recovery. Given the character of the
recovery to date, it is difficult to envision area employ­ment
turning up prior to next fall. For a turnaround to
materialize then will require a string of increases in
the Index similar to the January advance.
INDEX BREADTH ENCOURAGING. A particularly en­couraging
aspect of the January advance in the Index
was its breadth - all four Index components rose. At
first, primarily the financial components of the Index
- national and area measures of real money -were
causing the Index to rise. This increase in financial liquid­ity
has in turn caused the rea/ components residential
construction and unemployment - to move favor­ably.
INITIAL UNEMPLOYMENT CLAIMS FALLING. The one
component of the Index remaining stubbornly unfavor­able
for the four months prior to January was initial
claims for unemployment insurance. Although the num­ber
of initial claims has declined the last three months,
the Index component- which is a five-month moving
average - just turned favorable in January. For 1982,
initial claims for unemployment insurance averaged
6,766 as compared with a seasonally adjusted 5,584 for
january. Initial claims exceeded 10,000 in both Sep­tember
and October, 1982.
HOUSING STARTS UP. Building permits issued for new
single-family houses in Allen County have risen for
seven consecutive months, from 17 last July to 34 in
january. As has been noted with respect to interpreta­tion
of the recent data on housing starts nationally, part
of the increase may be an aberration resulting from the
unseasonably mild winter; nevertheless, it still remains
encouraging that the mild weather in fact induced
something.
For 1982, new single-family building permits issued in
Allen County totaled 230, the lowest in the 14 years for
which records are available. It contrasts starkly with the
previous low of 328 permits issued in 1981 and the record
1,954 issued in 1978. (Duplexes are included and counted
as two single-family starts.)
INDEX OVERVIEW. The Index rose in january to 80.8
percent of its 1979 average. This was a two percent
increase over the 79.2 value in December. The Index has
risen eight of the last ten months and consecutively for
the last four months, after reaching the previous low of
77.1 last March.
Evaluating the Success of Fort Wayne"s Economic-Development Program
Millions are being pledged to an economic-development program for Fort Wayne. How can the success of these
planned expenditures be measured? There is a high probability that the root cause of failure for the Fort Wayne area
economy is not well understood, and an equally high probability that the measurement of success of the develop­ment
effort will be confused.
Like wildflowers in May, economic-development pro­grams
are springing up across Indiana, and Fort Wayne is
no exception.\2
Area media have repeatedly linked Fort Wayne's eco­nomic
decline with the misfortunes of International
Harvester, leading the public to the conclusion that the
problem with the Fort Wayne economy is I H. IH is only
part of the problem. More important is the structure of
the Fort Wayne area economic structure which IH epi­tomizes
and which pervades Indiana and its neighboring
states. This fact provides a basis for measuring the
success of individual economic-development programs.
Fort Wayne is part of the East North Central region
(Illinois, Indiana, Michigan, Ohio, and Wisconsin) which
during the latest national recession has suffered the
worst of the nine economic regions into which the U.S. is
officially divided. From January 1980 through March
1982, nonagricultural payroll employment in the ENC
region shrank 6.5 percent. (See Table 1)
Table 1. Regional Changes in Nonagricultural Payroll Employment,
March 1975 through March 19823
Region
New England
Middle Atlantic
East North Central
West North Central
South Atlantic
East South Central
West South Central
Mountain
Pacific
u.s.
Percentage Change*
Expansion Contraction Expansion and
Mar 75-Jan 80 Jan 80-Mar 82 Contraction
18.0 -0.2 17.8
7.9 -0.4 7.5
13.0 -6.4 6.6
18.3 -3.1 15.2
22.1 1.6 23.7
20.4 -3.0 17.4
29.2 9.8 39.0
33.2 4.0 37.2
27.2 1.3 28.5
1&8 -L5 1&3
*The same base - in thi s case, March 1975 - was used for determining both percentage
ex pansion and percentage con traction. This allows ca lculat ion of the net change over the
cycle (column 3) .
Compounding the problems of the region is the fact that
employment growth from the end of the 1973-1975
recession to January 1980 was next to the bottom at 13
percent. (See Table 1) When the effect of the recession is
subtracted from the previous expansion to obtain the
net gain in employment over the cycle4 (Table 1,
column 3), the ENC region is again last at 6.6 percent,
with the Middle Atlantic region (New Jersey, New York,
and Pennsylvania) running a close second at 7.5 percent.
In fact, all other regions experienced double-digit
expansion rates, with employment in the West South
Central and Mountain regions expanding by more than
a third.
Comparison of the Fort Wayne area and ENC region
economies (Table 2 and Figure 2) leads one to the con­clusion
that Fort Wayne shares the problems of the
region of which it is a part.
Table 2. Nonagricultural Payroll Employment for the Fort Wayne SMSA
and the ENC Region, March 1979 through September 1982*
Region Level** Change in Level
Mar 19793 Sept 1982 Persons Percentage
Fort Wayne SMSA 182,400 162,300 -20,100 -11 .02
East North
Central Region 16,893,400 15,953,400 940,000 - 5.89
* Indiana labor Market letter, Indiana Employment Security Divisio n, and Employment and
Earnings, Bureau of labor Statisti cs, U.S. Department o f labor.
* *March 1979 was the cyclical peak for employment in the Fo rt Wayne SM SA. Using it as the
base for calculations creates the maximum poss ible decrease for the SMSA when compared
with the ENC region or ot her Indiana met ropolitan areas (Tab les 2 and 3).
If the decline in employment in the Fort Wayne area had
matched the ENC region 's decline, 10,743 jobs (0.0589 x
182,400) would have been lost since March 1979. That
leaves 9357 (20,100-10,743) lost jobs to be accounted for
by special factors. Assuming a one-to-one ratio between
basic employment (eg., I H) and secondary employment
(eg., XYZ Cleaners), 4,679 basic jobs are available for
assignment to special factors. Clearly, the extraordinary
problems of I H have further debilitated an already weak­ened
area economy; however, employment in the area
and at IH would have fallen substantially regardless of
them. One need look no further than the decline in
industry sales of heavy-duty trucks (Figure 9, p. 5).
To reemphasize the point that Fort Wayne's problems
are more pervasive than I H, compare employment
among four Indiana metropolitan economies- Madi­son
County (Anderson), Bartholomew County (Colum­bus),
Allen County (Fort Wayne), and St. Joseph County
(South Bend). (See Table 3 and Figure 3)
Table 3. A Comparison of Nonagricultural Payroll Employment among
Four Indiana Metropolitan Economies, March 1979
through September 19S2*
City Level
Mar1979** Sept1982
Anderson 53,100 42,800
Columbus 33,163 28,111 (June)
Fort Wayne 182,400 162,300
South Bend 116,500 103,100
* Indiana Employment Securi ty Division
• •see Table 2
Change in Level
Persons
-10,300
- 5,052
-20,100
-13,400
Percentage
-19.40
-15.23 (June)
-11.02
-11 .50
Given the national media coverage of record high
unemployment rates in Anderson, it should not be sur­prising
that it fared the worst of the four areas. That Fort
Wayne suffered the smallest percentage decline may be
surprising, however, since Fort Wayne has shared with
Anderson the dubious distinction of receiving national
news coverage.
In fact each of these four metropolitan areas has had
its own version of the IH tale. The national media cover­age
was not always present, but the results were similar.
What observations relative to economic development
are to be drawn from the comparisons noted above, and
how should development success be determined?
2
• Certainly the Fort Wayne area economy has suf­fered
because of the problems of International
Harvester, but it is vitally important that we recog­nize
that the economy's problems are deep­rooted
problems, not individual company prob­lems.
Only then will the widespread political base
for a concerted economic-development effort be
firmly established.
• There is no excuse for not trying because "the
economic Gods have dealt Fort Wayne a knockout
blow." Each area in the ENC region has had its own
version of IH-the name changing, but the results
remaining similar.
• Fort Wayne's economic-development efforts
should be measured against the change in the
economic fortunes of the ENC region. Table 1
shows that the region's economic performance
has differed dramatically from the U.S. average.
Economists disagree as to how the region will fare
in any national economic recovery because they
disagree as to what portion of the recent employ­ment
losses is permanent (structural) versus cycli­cal.
Comparing Fort Wayne's economic perfor­mance
with that of the region eliminates the need
to resolve this issue; the relevant question be­comes,
((How is Fort Wayne doing vis-a-vis the
region?"
• By comparing the changes in Fort Wayne's em­ployment
with those of the ENC region (Figure 2L
one preempts politicians and others from taking
credit for employment growth resulting solely
from cyclical change, rather than from economic
development. That is, a rising trend line for Fort
Wayne relative to the trend line for the ENC
region will be clear proof of the success of the
economic-development effort.5 Failure of Fort
Wayne area employment growth to outpace ENC
regional growth will suggest an unsuccessful de­velopment
program.
But failure of the Fort Wayne area economy to
improve vis-a-vis the ENC region would not be
incontrovertible evidence of the failure of our
economic-development efforts. If everyone else
in the region also enters the economic-develop­ment
game and is successful, Fort Wayne will liter­ally
need to "run faster to keep pace." If this were
to occur, then simply keeping pace, rather than
outpacing, would be consistent with success.
11 n a February 8, 1983, article entitled, "City unveils loan plan to attract firms," the journal­Gazette
reported that "The city eventually expects to have a pool of up to $50 million, which
could be used for loans to industrial employers."
2The Greater Fort Wayne Chamber of Commerce: Five Year Strategic Marketing Plan, January
1983.
3Browne, Lynn E., " Two Years of Stagflation: A Regional Perspective," New England Economic
Review, Sept/ Oct 1982. Browne identifies four variables which account for 65 percent of the
difference in employment among regions. They are : industry mix, manufacturing earnings,
past rate of growth, and the farm sector.
•Officially, there have been two business cycles, given the brief expansion from january 19ijQ
through July 1980; however, for analytical purposes, the 1975-1982 period is assumed to have
constituted one business cycle. The ENC region did not share in the brief expansion.
SAn additional qualifier of success requires that job development also be efficient (i.e., that
expenditure per each job created be minimum).
Comparison Of Nonagricultural Payroll Employment
Figure 2.
~
II
""' "'
::r::
u
c.:
<
!
><
0
~
IN THE EAST NORTH CENTRAL REGION
(ILLINOIS, INDIANA, MICHIGAN, OHIO, AND WISCONSIN) AND THE FORT WAYNE SMSA
110..,...:.------------------'-------------.
100 -
901
-'
80 .
,,
\~ ,.,' ... ,",.,\
I
I
I
70 -+---,---- - T -------.·---r----r-----,---· ·,---- --
1975 1976 1977 1978 1979 1980 1981 1982 1983
3
FIGURE 3.
110 ...,------~A.::M.__:_O:::N_:G::....F:-0=-U=.:R..:..:M..:.:..E::.T.:..R:.:.O.:_:P_.O=_:L:I_.T::A._::N___A__R_:.E::_A__:S.__I_:N I_N_:_:D:__I__A::.N___A:'._ ___- -,
70 ~---,----,---,--~---,-----·~---~----
1975 1976 1977 1978 1979 1980 1981 1982 1983
'Data in Figure 2 are seasonally adjusted while data in Figure 3 are not. This accounts for the minor
differences between the Fort Wayne series in the two figures.
Figure 4.
1600
1550
1500 -
1450
1400
1350
1300
1250
1200
1150
1100
74
Figure 5.
1.30 I
1.25 -J
1.20 -1
t
1.15 I
1.10 .
1.05
1.00
0.95
75
GNP AND FINAL SALES - CONSTANT (1972) DOLLARS
- - - - - - - - - - - - ,--- /:: -_, .._' -
I '
76 77 78 79 80 81 82
TOTAL WAGE & SALARIED EMPLOYMENT- U.S. & FORT WAYNE SMSA
/41' .,'•\/I l 1
- - - - - - , ... - - - - ,-
' .. -...
83
0.90 -f-.--....,-.-.-.-.-r'-.-.-,-..,..,...,.~,.,.,..,...,...,.,....,-.-..,-.~..,..,~ r.-~~~..,. '
84
N ~ ~ 77 n n oo ~ ~ ~ 84
YE.AJ' ( 1 ~;XX J
'Figure 6. WAGE AND SALARIED EMPLOYMENT- FORT WAYNE SMSA
119800 -~ ---- I= "I- ---;=c===:::